Russel Metals Plays Down Steel Price Concerns

TORONTO (CP) -- Russel Metals Inc. [TSX:RUS] is looking to end the year on a high note following a 72% jump in profits in the third quarter and is playing down concerns about weakening steel prices.

Bud Siegel, Russel's president and chief executive, said Tuesday the Toronto-based steel supplier is ''pretty content going into the fourth quarter and flowing into the first quarter'' and will benefit from previous orders and backlog, despite ''a bit of softening'' in two of its businesses.

''I have to be careful when I say a slight amount (of softening) because obviously, we're working at all-time highs,'' he told a conference call with analysts a day after the company posted a solid quarterly profit increase.

''So when I say a slight amount of softening - probably every mill in the world would have killed themselves for these kinds of numbers four years ago. It's still very strong (and) I think it's going to remain relatively stable.''

Late Monday, Russel reported net profits of C$45 million or 72 cents a share on sales of C$672 million in the third quarter. That was up from C$26 million or 51 cents per share in the year-earlier period, when sales came in at C$629 million.

All three of Russel's businesses - metals service centres, steel distributors and energy pipe - recorded higher revenues and operating profits, amid historically high steel prices.

The company ended the quarter with C$231.1 million in cash, up from C$19.7 million at the end of September 2005.

Russel's board of directors also approved a quarterly dividend of 40 cents per share payable Dec. 15, to shareholders of record as of Nov. 15.

Chief financial officer Brian Hedges said the only downward pressure was in the company's flat carbon steel business, which represents about 7% of its product sales.

''We're also seeing for the first time out there some strong indication that the major steel producers are exerting some market discipline by curtailing production levels and trying to keep the supply and demand in better balance than they have historically,'' he said.

Siegel remained vague about the possible acquisitions, despite having said at the end of the previous quarter that Russel had cash earmarked for that purpose and would be open to purchases in both Canada and the United States.

''If we could find the right opportunity, we raised that equity for a purpose,'' he said. ''Hopefully we'll get to exercise it in a fruitful fashion.''

Russel Metals is one of the largest steel sellers in North America, operating through subsidiaries such as A.J. Forsyth, Acier Leroux, Pioneer Pipe and Spartan Steel Products.

On the TSX Tuesday, Russel shares traded down 76 cents, or 2.65%, at C$27.94. On Friday, the stock hit a record high of C$29.38.